Credit Card Review Blog

Five Great Reasons Your Business Should Have a Credit Card

Five Great Reasons Your Business Should Have a Credit Card

Many people use personal credit cards as a way to fund the startup of a business. Often, it is the only way many people can get a business started to buy supplies, products or services. Many businesses that used credit cards to start have become very successful while many others have left individuals saddled with tens of thousands of dollars in credit card debt. Although there are pros and cons to using a personal credit card to fund your business, your business should have a credit card regardless of whether you’re starting out or not.

Separating Expenses

Remembering if a charge from several months ago on your personal credit card was in fact for personal or business use may not seem like a big deal. However, this behavior can come back to bite you, courtesy of our friends at the Internal Revenue Service. Using the same credit card for personal and business expenses can give the IRS probability to suspect some expenses were personal in nature when you claimed them as business expenses. If you have separate personal and business checking accounts, there is no reason you should not be doing the same for expenses, and it is a must to be doing expense tracking. If you are audited by the IRS, the burden of proof lies on you, not them. Using a business credit card is an easier way to distinguish expenses for your business.

Tracking Expenses

Keeping track of expenses is one of two key components in knowing if your business is actually making money. Knowing where your business spends its money is also important. Whichever credit card issuer you choose, all the expenses you charge to the credit card are conveniently categorized to see where your business expenses are coming from. Employee cards are also available with a small or no annual fee, giving you control over each employee’s spending limit and giving you an effective way to track their expenses.

Taxes

Tax season comes and you can’t remember where you put all those receipts. You tucked some away here, some away there and some in your wallet or purse. You paid cash for something recently, but can’t remember where and you have no idea where the receipt is - I’ve been there. Using a credit card could have just made your life a lot easier. Your monthly statements can act as an easy way to see most, if not all, of your expenses for the year (the ones you charge anyway). They’ll already be nicely categorized for you and provide an additional source of documentation for business expenses.

Rewards

This is my favorite part of using a business credit card; getting some kind of reward on every purchase the business makes. You can choose a credit card that earns cash back rewards, airline miles or travel points, gift certificates, merchandise and more. You can then choose to use the rewards your business earns to save money on expenses. I’ve even seen many business owners use the rewards to pay for portions or all of a family vacation. If your business requires many visits to the pump, then check out a credit card that earns additional rewards on gas purchases. If you travel a lot, then apply for a credit card that earns airline miles or other travel rewards. Whatever the nature of your business, apply for a credit card that earns a bonus on the purchases you make most.

Payment options

Not all businesses are the same, but some businesses only get paid a few times or even once per month. Having a credit card due date can wreak havoc on your business cash position if that due date is before the money comes in. Being able to select a payment due date is another convenience offered by most credit card issuers. You get to pick when is the best time for your business to pay it’s bill. Many cards also give your business the flexibility to carry a balance or pay the balance in full each month. Credit card companies want your business and they’re willing to be flexible to work with yours.